Sacco lending hits Sh180bn in 8 months on public confidence

Saccos’ loan book has grown by eight per cent in the eight months to August buoyed by public confidence and product diversification.

Data from the Sacco Societies Regulatory Authority (Sasra) shows that deposit taking saccos had given out loans worth Sh180.4 billion as at the end of August up from Sh167 billion in December.

The institutions which have a membership of about three million had deposits worth Sh173 billion.

Current high interest rates charged by the banking sector has seen borrowers increasingly opt for the relatively cheaper saccos, whose rates are also stable given that changes have to be approved by members during annual general meetings.

“There is increase in confidence in the sector given the level of investment input. Also the growth in returns is higher compared to the alternatives,” said Stima Sacco CEO Paul Wambua.

Saccos have also been widening their product offering to accommodate the needs of their members and ensure they do not lose them to banks. Some, including Stima Sacco, are now partnering with banks to offer cheque clearing services associated with current accounts.

The licensed saccos numbering 215 have to ensure they meet minimum capital requirement set by Sasra by next year which include members’ input of Sh1 billion. This is to ensure that the institution are strong enough to absorb any risks and are liquid to meet the members’ needs.

Forty-one saccos have also rebranded in the last two years to attract more members by shedding off the common bond, such as profession, which restricted their membership. Nakuru Teachers Sacco is now Cosmopolitan while Muramati Sacco rebranded to Unaitas.

The sacco sector, however, feels that it has room for growth given that its penetration is currently at 18 per cent of the employable population — those aged between 21 and 68.

“In terms of penetration we are at 18 per cent, behind Ghana and only slightly above Tanzania at 14 per cent; so we still have some way to go,” said Sasra policy, research and development manager John Mwaka.

Saccos are crucial in deepening access to credit in an economy where banks still heavily rely on collateral to lend. Commercial banks have more than 19 million deposit accounts and 2.3 million loan accounts while saccos have three million members with 2.2 million having loans.

Sasra was formed to help monitor the growth of saccos which are popular in rural Kenya and were growing to semi-banks as economic fortunes of members improved.

There are currently 73 licensed ones associated with farmers, while 45 are formed by teachers and 41 of government institutions.

However, five counties at present do not have a single deposit taking sacco: Makueni, Garissa, Wajir, Mandera and Turkana.